Neural progenitors are organized as a pseudostratified epithelium held together by adherens junctions (AJs), multiprotein complexes composed of cadherins and α- and β-catenin. Catenins are known to control neural progenitor division; however, it is not known whether they function in this capacity as cadherin binding partners, as there is little evidence that cadherins themselves regulate neural proliferation. We show here that zebrafish N-cadherin (N-cad) restricts cell proliferation in the dorsal region of the neural tube by regulating cell-cycle length. We further reveal that N-cad couples cell-cycle exit and differentiation, as a fraction of neurons are mitotic in N-cad mutants. Enhanced proliferation in N-cad mutants is mediated by ligand-independent activation of Hedgehog (Hh) signaling, possibly caused by defective ciliogenesis. Furthermore, depletion of Hh signaling results in the loss of junctional markers. We therefore propose that N-cad restricts the response of dorsal neural progenitors to Hh and that Hh signaling limits the range of its own activity by promoting AJ assembly. Taken together, these observations emphasize a key role for N-cad-mediated adhesion in controlling neural progenitor proliferation. In addition, these findings are the first to demonstrate a requirement for cadherins in synchronizing cell-cycle exit and differentiation and a reciprocal interaction between AJs and Hh signaling.